Paul v. Merrill Lynch Trust Co. of Texas

183 S.W.3d 805, 2005 Tex. App. LEXIS 10382, 2005 WL 3436787
CourtCourt of Appeals of Texas
DecidedDecember 14, 2005
Docket10-04-00185-CV
StatusPublished
Cited by23 cases

This text of 183 S.W.3d 805 (Paul v. Merrill Lynch Trust Co. of Texas) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Paul v. Merrill Lynch Trust Co. of Texas, 183 S.W.3d 805, 2005 Tex. App. LEXIS 10382, 2005 WL 3436787 (Tex. Ct. App. 2005).

Opinion

OPINION

BILL VANCE, Justice.

Appellants Lisa Martinez Paul (Lisa) and Steven Edward Martinez (Steve) (collectively Appellants) raise four issues complaining of a probate court’s rulings on the characterization of a gun collection and on attorney’s fees. We will modify the pro *807 bate court’s judgment and affirm it as modified.

Factual Background

At the time of his death on August 25, 2002, Jose Eduardo Martinez (Ed) was married to Appellee Toni Wasson Martinez (Toni). As an accident reconstruction expert, Ed had amassed a multi-million dollar estate that included a large home in College Station, 594 acres of land, at least twelve motor vehicles, multiple businesses, stocks and bonds, jewelry, a watch collection, and a large gun collection.

Two documents govern the disposition of Ed’s property. Ed and Toni had entered into a premarital agreement in 1996 (reaffirmed as a marital agreement soon after their marriage) providing that the undefined “contents of the home” became the property of the survivor of the parties (Toni, in this case) in the event of death. On November 29, 2000, Ed executed a will that was later amended by a codicil executed on August 21, 2001. The residuary of Ed’s property — the property other than the “contents of the home” — passes under the will and, after several specific bequests to his children are deducted, “pours over” in a family trust. The will does not otherwise refer to Ed’s tangible personal property.

Toni is the primary beneficiary of the trust, having only an income interest. Appellants — Ed’s adult children from a previous marriage — receive the remainder of the trust when it terminates because Toni dies or remarries or cohabits with a man. In his will, Ed appointed Appellee Merrill Lynch Trust Company of Texas (now known as Merrill Lynch Trust Company FSB) to be the sole independent executor of his estate — without court intervention and without bond — and the sole trustee of the trust.

The will contains a “no-derivative action” clause that explicitly prohibits Appellants from bringing any derivative cause of action, particularly “any derivative cause of action to collect damages on behalf’ of Ed’s estate or the trust. The will also contains an “in terrorem clause” forfeiting all gifts, even if a beneficiary’s challenge to the dispositions under the will “was taken in good faith and with probable cause.” 1 However, the will gave Lisa the power to seek removal of Merrill Lynch as “the current fiduciary” and appointment of a replacement fiduciary.

In early to mid-September 2002, after Merrill Lynch accepted the estate as a client but before it qualified as executor, Scott Luhnau, Merrill Lynch’s representative, began inspecting and identifying the estate’s property. Luhnau drove to College Station, inspected the home and cars, and had the guns and jewelry appraised. He met with Toni, who told him that Ed had told her that she was to receive “all the cars” and “everything in the house.” Toni testified that Luhnau told her that she would not be making decisions on the property. Toni had previously gone to Ed’s office and removed all of his personal property and mementos, storing them in boxes as requested by Merrill Lynch.

Faced with the marital agreement’s disposition language and the will, Merrill Lynch, as independent executor, had to determine Ed’s intent and decide what personal property (the “contents of the home”) went to Toni under the marital agreement and what property passed under the will to the estate and into the trust (property other than the “contents of the *808 home”). After discussions -with Toni and with some of Ed’s business associates, including his bookkeeper, Merrill Lynch distributed to Toni some of the property that Appellants later contested. In its disposition of Ed’s property, Merrill Lynch defined “contents of the home” as tangible personal property contained in or associated with the residence structure and lot, and tangible non-business personal property wherever located or usually located. Merrill Lynch concluded that Toni was entitled to the following property: eight vehicles; 2 a watch collection and jewelry; and a gun collection that was being kept at Ed’s office in a gun safe. 3 With respect to vehicles that Toni had sold, Merrill Lynch had Toni place the proceeds in a separate Merrill Lynch account pending the resolution of the brewing dispute over the property.

Procedural Background

Appellants sued Merrill Lynch in November 2003. Their live pleading at the time of trial (Plaintiffs’ Fifth Amended Original Petition) essentially claimed that Ed’s will revoked his marital agreement with Toni and that Toni was not entitled to any of Ed’s property as the “contents of the home.” Appellants alleged that Merrill Lynch committed gross misconduct and gross mismanagement by transferring property to Toni, and they sought removal of Merrill Lynch as independent executor and disgorgement of its executor fee ($175,000). They sought actual damages (approximately $625,000) on behalf of the estate caused by Merrill Lynch’s (1) alleged failure to collect and gather all of the estate’s property and place it in the trust, and (2) alleged breach of fiduciary duties under sections 230 and 233 of the Texas Probate Code. Appellants asked for exemplary damages of $500,000 and attorney’s fees. Appellants did not request a declaratory judgment or construction of any will provisions.

Merrill Lynch filed a counterclaim that added Toni as a third-party defendant. Its five pleading at the time of trial (Fifth Amended Counterclaim in the Form of Petition for Relief, Declaratory Judgment and Constructive Trust) sought resolution of the contested property in light of the provisions in the marital agreement and the will, along with recovery of attorney’s fees. Merrill Lynch specifically asked the court to construe the marital agreement’s provision at issue, to declare the owners of the contested property, to impose a constructive trust on any property improperly given to Toni, and to award it attorney’s fees under the Declaratory Judgments Act. 4 Alleging that it was defending in good faith Appellants’ claim to remove it as independent executor, Merrill Lynch sought to recover its attorney’s fees under section 149C(c) of the Probate Code. Mer *809 rill Lynch also alleged that Appellants were precluded from bringing their alleged derivative action by the no-derivative action clause and the in terrorem clause and that they lacked standing under these clauses as a result of their bringing claims.

Toni’s original answer was a general denial. She subsequently filed a motion for leave to file a trial amendment to allege a claim for attorney’s fees, and the probate court granted Toni leave.

At trial, the parties focused on twelve categories of property that Appellants contended were trust property (rather than “contents of the home”) and on which Merrill Lynch sought declaratory judgment and a constructive trust imposed on Toni if necessary. Eight of those twelve categories were cars.

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Cite This Page — Counsel Stack

Bluebook (online)
183 S.W.3d 805, 2005 Tex. App. LEXIS 10382, 2005 WL 3436787, Counsel Stack Legal Research, https://law.counselstack.com/opinion/paul-v-merrill-lynch-trust-co-of-texas-texapp-2005.